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Kimberly Amadeo

Weak Consumer Spending Means Slow Economic Growth

By June 27, 2011

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Economic growth, or  GDP, for the first quarter (January-March) 2011 was 1.9%. The BEA barely changed its  final estimate. However, GDP was significantly down from the Q4 2010 growth rate of 3.1%, and lower than the ideal GDP growth rate of 2%. Most important, it's  less than the 3% or more needed to create jobs.

Why did growth drop so much? Two words -- holiday sales. Although growth continues to be driven by personal consumer expenditures, it's not as much as during the holiday season.  The economy was also helped by an uptick in exports, itself a result of a declining dollar. Growth would have been stronger, except for the drag in state and local government spending, and businesses not restocking inventory. Imports, which are a subtraction in the calculation of GDP, decreased.

For a history of all GDP reports since 2007, see GDP Current Statistics.

What It Means to You

Since exports are anr important driver, Americans must become more aware of global trends. The BRIC countries -- Brazil, Russia, India and China -- are growing their middle class and purchasing power. Businesses who provide value to these and other emerging markets will prosper in the landscape that is emerging beyond the Great Recession.

Economic growth driven by consumer confidence means the economy is getting on strong footing. Now, more than ever, businesses need to understand consumer spending trends, and understand how the recession has changed shopping habits. An important trend is the Shift to Thrift, where everyone is focused on value. Whether you are a corporate CEO, small businessperson or salaried employee, make sure you communicate the value you provide. This value is your competitive advantage and your brand promise.


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